session 5 - ut · 2 paradigms •transactional marketing –characterized by 4ps –no focus on...
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Relationship marketing using the Internet
Session 5
Georg Singer
georg.singer ät ut . ee
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Why?
• Customer acquisition online is expensive (20-30% more expensive than offline)
• Retaining 5% more customers, profit boost of 25-95% (Reichheld and Sasser)
• Under tough competition 5 times more costly to attract new customers than to retain current customers
3/16/2011Internet Marketing - UT Spring Semester
20112/28
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Why?
• engaged customers generate 1.7 times more revenue
• engaged employees and engaged customers, revenue gain of 3.4 times (Asplund)
• cost of acquisition occurs only at the beginning of a relationship, the longer the relationship, the lower the amortized cost.
• customers less inclined to switch, less price sensitive.
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Why?
• free word of mouth promotions and referrals.
• more likely to purchase ancillary products and high margin supplemental stuff
• less expensive to service, familiar with the process, require less "education”
• makes the employees' jobs easier, feed back into better customer satisfaction
3/16/2011Internet Marketing - UT Spring Semester
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CRM and related approaches
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Was - Is
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Definition CRM
• In theory Relationships on individual basis
• In practice CRM, automatically develop relationships with groups or segments
• Messages delivered via e-mail, recommendations and promotion on websites
• Long term relationship needed with each customer
– What is Amazon doing here?
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2 Paradigms
• Transactional marketing
– characterized by 4ps
– No focus on customer retention
– passive, reactive and short term customer relationships
• CRM
– Relatively expensive
– Improves ROI
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Differences between relational and transactional marketing
Transactional paradigm Relational paradigm
Market segment Individual customer
Transaction duration Lifetime
Margin Lifetime value
Market share Most valued customers
and customer share
Mass market broadcast Dialogue and tailored
communications
Passive consumers Empowered clients
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CRM applications
1. Sales force automation
2. Customer service management
3. Campaign management
4. Analysis
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CRM data
• Personal and profile data– Contact details
– Preferences
• Transaction data– Sales history
• Communications data– Campaign history
– Research / Feedback / Support queries
– Contact reports (B2B)
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Customer Value Concept
Focus limited resources andmarketing activities on themost valuable customers
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Categorising customers according to value
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Independent feedback for Charles Tyrwhitt (www.ctshirts.co.uk), a shirts retailer
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Concept of Customer lifecycle management (CLM)
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Customer lifecycle management
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5Is
• Identification
• Individualization
• Interaction
• Integration
• Integrity
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Permission marketing (Seth Godin)
• Key concepts
– Not interruption marketing
– Not SPAM
– Requires opt-in (online to e-mail)
– Opt-out
– Learning about the customer
– Initial and continued relationship is based on incentives
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Example – Permission marketing
• Goal: Market SMS banking system at First Direct– Use mobile marketing with short codes
– Win a prize, SMS with email address and receive welcome package (answer to question, post code
• Objectives (results)– Capture 5000 mobile phone numbers (200%)
– Acquire 3000 email addresses (176%)
– Raise awareness about the new service (31 000 customers viewed demonstration)
– Create 1000 new registrations (576% of plan)
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A summary of an effective process of permission-based online relationship building
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Matrix of customer touch points for collecting and updating customere-mail contact and other profile information
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Concept of Lifetime value modeling
• Key to theory and practice of customer relationship management
• Total net benefit a customer will provide a company over the total relationship with the company
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Example LTV – 50$ to acquire a customer too much even if first
purchase is much less?• subscription service, remain a customer for 3
years, $20.00 per month • $20.00 X 12 months = $240.00 per year;
$240.00 x 3 years = $720.00 potential revenue • costs over the those 3 years are approximately
$100.00• $720.00 - $100.00 (expenses) = $620.00;
$620.00 - $50.00 (cost to acquire customer) = $580.00 profit.
• A fairly healthy return on your initial $50.00 investment!
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An example of an LTV-based segmentation plan
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Loyalty Schemes
• Encourage customer extension and retention• Examples: Selver Card, Miles and More, Hilton
Bonus card• Used for CRM purposed as follows:
– Initial bonus points for sign-up to online services or initial registration
– Points for customer development and extension – Additional points to encourage reactivation of online
services– Popular products are offered for a relatively low
number of points, encourage repeat purchases
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Social Networks
• Provide many of the attributes for effective relationship marketing
• Communities of – Purpose
• Autotrader.co.uk
– Position• 50connect.co.uk, www.mumsnet.com
– Interest• Thefootballforum.net, unitedcats.com, uniteddogs.com
– Profession– ……more in the case study!
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Cu next week
• Homework
• Case study about social media as a marketing tool
• MOLSON CANADA SOCIAL MEDIA MARKETING
• 1 presentation (3-4 slides, 5-6 mins) per group
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